P&G

Adbrands Weekly Update 18th Aug 2016: P&G is continuing to tweak

international media requirements. It concluded a review in China, retaining
Starcom as lead agency for buying but expanding the role of planning partner
Mediacom to cover more brands, as well as branded entertainment, digital and
selected ecommerce projects. P&G also confirmed this week that it will indeed
review media in the UK, as had been rumoured for a couple of weeks. Starcom
currently handles broadcast and most other media, while Mediacom has print and
some planning duties.
Adbrands Weekly Update 11th Aug 2016: Disposals and the effect of currencies
have effectively wiped out a decade's worth of topline growth for Procter &
Gamble, with revenues for the year to June 2016 tumbling to $65.30bn, the
lowest level since 2005 when the group acquired Gillette. That's down by almost
$20bn over the past three years from the group's reported peak of $84.2bn in ye
2013. The impending disposal of much of the beauty portfolio to Coty reduced
reported revenues from that unit alone in the most recent year by more than
$6.5bn to $11.5bn, from over $20bn in 2012. On a comparable basis, group
revenues from continuing operations fell only 8% year-on-year, and the group
claimed organic growth of 1% excluding the effect of currencies and other
exceptional items. However the changes within the portfolio have restored fabric
& homecare to its traditional role as the group's biggest business by both
revenues ($20.7bn) and profits ($2.8bn). The combined baby, feminine & family
care division wasn't far behind at $18.5bn and $2.7bn respectively. The absence
of last year's round of impairments and losses from discontinued operations gave
a considerable boost to profitability, with net income surging by 48% to
$10.51bn.
Adbrands Weekly Update 28th Apr 2016: Ads of the Week "Thank You Mom: Rio
2016". ...And here we go. P&G kicks off the Olympics marketing season for real
with the unveiling of its new global sponsorship campaign, in the safe hands of
Wieden & Kennedy. They've dusted off and wholly updated that familiar Thank
You, Mom concept to deliver an even more emotionally charged film. Your mum
got you through countless earlier emotional tests; she's still here for you now at
Rio 2016. Fine work.
Adbrands Weekly Update 28th Apr 2016: Not much sign yet of a magic bullet at
P&G from new CEO David Taylor. Figures for the company's 3Q to the end of
March showed a decline in sales volumes across four of the group's five
segments, with beauty and the Gillette grooming units down 5% and 6%
respectively. Only fabric and home care avoided a decline in volumes, but was
merely flat. Reported sales slipped 7% as a result of currencies and other issues.
On an organic basis, excluding currencies and disposals, higher prices delivered a
modest 1% increase. Net attributable earnings rose 28% year-on-year but only as
a result of contributions from discontinued businesses, including Duracell, which
was finally demerged during the quarter. Net earnings from continuing operations
fell 3%, but earnings per share were at least slightly better than analysts had
been expecting. CFO Jon Moeller fired another warning shot across the bows of

P&G's marketing agencies, despite having already cut around $370m from
agency fees and production costs. "After two strong years of savings, we will
enter next year still spending $1.5bn in agency-related marketing costs still
more room to improve. We'll continue to look for efficiencies in working media
with better advertising targeting and earned media campaigns with engaging
content." Specifically he's looking to cut an additional $200m this year.
Adbrands Weekly Update 28th Jan 2016: Procter & Gamble's latest results
were also dented by foreign exchange, but the group was finally able to report an
increase in organic sales after a series of declines. Reported revenues for the
group's 2Q slipped 9% to $16.9bn, but would have grown 2% excluding M&A and
currency fluctuation. Yet any such gains came from more aggressive pricing. All
five reporting divisions reported decreases in sales volumes, with the hardpressed beauty business down 7%. Those falls were offset by higher prices.

Brands & Activities

Procter & Gamble defined the nature of packaged goods brand marketing in the second half of
the century, and despite an alarming wobble in the crossover from the 20th to the 21st
centuries, it was by 2004 once again setting the pace for other marketers to match. Between
2003 and 2010, the group consistently delivered strong growth and an unbeatable line up of
products, virtually all of which occupied the #1 or #2 position in their respective markets. No
other company could (or can) boast as dynamic a line-up of brands, including 25 worth more
than $1bn a year in sales. But with sales now over $80bn, and performance slowing in several
areas, a serious question began to emerge regarding future development. It became hard to see
just where P&G could go next before the sheer size of the company pushed it towards
demerger. Several brands have already been divested, and a big sale of much of its beauty
portfolio is now imminent.
Procter & Gamble is a giant in packaged consumer goods, the worldwide #1 in baby care,
fabric care, feminine care and haircare, and a major force in virtually every other sector in
which it operates. The company controls around 300 brands in total, marketed across over 160
countries, but the portfolio is led by a collection of what were 25 billion-dollar brands in
2013. The biggest of these were: Pampers (sales of around $11.25bn in 2013,
Euromonitor/Sanford Bernstein estimates), Tide (around $5bn), Ariel ($4bn), Pantene
($3.8bn) and Olay ($3.4bn). They are supported by Always, Bounty, Charmin, Iams, Downy
and Crest. Wella, Actonel and Head & Shoulders joined the Billion Dollar club in 2004;
Dawn topped $1bn in sales in 2005. Gillette Mach 3 razors, Gillette Series grooming
products, Duracell, Braun and Oral-B were added to the portfolio in 2006. Gain was a new
member in 2007, followed by Gillette Fusion during 2008, Ace in 2010 and Febreze in 2011.
More recent additions to the billion-dollar-club are SK-II skincare and Vicks, both of which
surpassed that level for the first time in 2012. However that collection of trophies is being
whittled down by the disposal of non-core businesses. Iams and Duracell were divested in
2014 and 2015. More are likely to follow, not least Wella. In 2014, another 14 brands had
sales between $500m and $1bn per annum, including Cover Girl, Herbal Essences, Swiffer
and Tampax. Here too there are brands up for sale. CoverGirl is expected to be sold in 2015.

P&G's resurgence in the 2000s followed a wobble at the end of the 1990s. After several years
of strong development, P&G suddenly appeared to hit a brick wall. Growth dried up, several
key brands lost their leadership of the market to rivals, and new product launches proved
disappointing or even to be downright failures. After two years of further internal
restructuring, P&G had found its way forward again by early 2002, and delivered strong
growth, much of it fuelled by acquisitions, between 2004 and 2010. Yet concerns began to
emerge once more in 2011 as a result of a slowdown in growth, rising costs, and some
extraordinary planning errors, not least in what was initially a botched launch of new Tide
Pods in the US.
In addition to its marketing skills, P&G has long been recognised for its exceptional strength
in research and development, not just of new products, but also component ingredients and
packaging design. The group still comes up with more new ideas than even it can develop
commercially. As a result, since 2000, it has greatly increased its willingness to form mutually
beneficial "innovation partnerships" with other companies. In one such arrangement P&G
licenses technology it developed for plastic wrappings to smaller company Clorox for use in
products sold under the latter's Glad brand. In 2008 it agreed to lend a wide range of other
packaging technologies, including non-splatter nozzles for plastic bottles, to food company
ConAgra.
Procter & Gamble's corporate structure has undergone a series of changes since the late
1990s. In 1998, the group abandoned its arrangement as a collection of separate geographic
businesses in favour of global divisions specialising in specific sectors. This greatly
accelerated the worldwide roll-out of key products with what was ultimately considerable
financial gain. Since then, these divisions have been steadily consolidated, from seven to five
to four to three global business units (GBUs) in July 2007, and then to just two in February
2011, when P&G Health & Well Being was split and absorbed into its two partner groups,
P&G Beauty & Grooming and P&G Household Care. (See separate profiles for brands and
activities). In another group reshuffle in June 2013, P&G was reordered once more into four
divisions: Beauty; Fabric & Home Care; Health & Grooming; and Baby, Feminine &
Family Care. A separate GBU provides worldwide marketing, market development and other
corporate functions.
Several brands, considered to be non-core, have been sold in recent years. In the second half
of the 20th century, P&G assembled a sizeable portfolio of food products, but this business
was quickly overshadowed by more attractive market segments such as beauty or family care.
The Snacks & Coffee division gained a largely unexpected new lease of life in the 1990s from
the sudden popularity of Sunny Delight and Pringles, yet it remained an uncomfortable fit
with P&G's other interests. Plans were announced in 2001 to spin these brands off into a joint
venture with Coca-Cola, but these foundered as a result of objections from shareholders. That
same year, Jif peanut butter and Crisco cooking oils were spun off into JM Smucker. After
several months looking for a buyer, Sunny Delight and German juice brand Punica were sold
to venture capital firm JW Childs in 2004. Folgers coffee, too, was transferred to Smucker
during 2008, leaving Pringles as P&G's last remaining food product. A plan to transfer that
business to snack company Diamond Foods collapsed in 2011, and the brand was eventually
sold to Kellogg's. Petfoods division Iams was sold in two parts in 2014 and 2015 to Mars and
Spectrum Brands.

Another major divestment was the Duracell battery business, which was transferred to
Berkshire Hathaway in 2015. Warren Buffett agreed to take over the standalone business
from P&G for a net value of around $2.9bn. The deal is to be structured as a slightly
unconventional but highly tax-efficient asset swap. Berkshire will surrender an existing
shareholding in P&G, worth $4.7bn at current prices, back to the company, which will in
return inject $1.8bn in cash into the Duracell Company as a parting dowry. As a result, both
companies avoid a sizeable tax penalty that would have been generated by a straight sale of
assets.
Recently, the group has established a major presence in sports sponsorship. It signed up as an
official sponsor of the US national team in the 2010 Winter Olympics, promoting several
individual products, mostly family-oriented brands, in a wide-ranging and imaginative
campaign. The apparent success of that campaign led to the group signing up in summer 2010
as top-line sponsor of the main Summer games. Commencing with the 2012 London
Olympics, that ten-year deal covers three summer and two winter Olympics. In addition, P&G
became the first corporate sponsor with rights to promote multiple different brands under its
IOC partnership agreement. Its 2012 "Thank You Mom" campaign, celebrating the support
given to athletes by their mothers, was widely regarded as one of the year's standout
campaigns, and won a Creative Emmy as the Best TV Commercial of the Year.
Financials
Despite its growing challenges and several divestments, P&G's total revenues had continued
to rise steadily, reaching a new high of $84.17bn for the year to June 2013, up just 1% on the
previous year. However net income has come under greater pressure as a result of the increase
in commodity costs, as well as higher marketing spend. After peaking in 2009 at $13.4bn
(including a large gain from Folgers), net profits slid back in each of the two following years,
shedding 9% in 2012 to $10.76bn. That figure included a $1.58bn impairment charge against
professional haircare operations. For the year to 2013, there was a 5% recovery to $11.31bn.
A series of further sales reduced revenues for the year to June 2014 to $83.06bn, though on a
comparable basis, sales from continuing operations were up 0.6%. Organic sales excluding
exchange rates were up 3%. Net income recovered to $11.64bn.
Further disposals, as well as the impact of exchange rates, cut into revenues for the year to
June 2015. Topline slipped back below $80bn, to $76.28bn. Net income slumped 40% to
$7.04bn, the lowest level since 2006. It was undercut by numerous factors including higher
costs, a $2bn charge against its Venezuelan subsidiary, another $2bn on impairments and a
$1.8bn loss from discontinued operations. At constant rates, organic revenues edged up 1%.
Walmart is the group's biggest global customer, accounting for 14% of revenues, or $10.7bn
in 2015.
Disposals and currencies made a big dent in revenues for the year to June 2016, with topline
tumbling to $65.30bn. That was down 8% year-on-year on a comparable continuing basis, but
represented the lowest reported revenues for P&G since 2005, when the group acquired
Gillette. Excluding divestments and currencies, the group claimed an overall organic sales
increase of 1%, with positive growth in all reporting segments. Without the impact of

impairments and losses on discontinued operations which affected the previous year, net
income powered up by 48% to $10.51bn.
The group still generates 37% of revenues from the US (and another 3% from Canada and
Puerto Rico combined). Its next biggest single country is China at 8% in ye 2015. Europe
accounted for 26%, Latin America for 10%, and 8% apiece from the India/Middle East/Africa
group and other Asia Pacific markets.
Management
Following his appointment as CEO in 2000, Alan ("AG") Lafley was responsible for
orchestrating a spectacular rejuvenation of P&G after several years of stagnation. Over the
next nine years he effectively doubled the group's revenues as a result of a series of bold and
generally successful acquisitions, and established a strong presence at the higher end of the
beauty and personal care market. He stepped down as CEO in July 2009 and was replaced by
group chief operating officer Bob McDonald. Lafley passed over the role of chairman to
McDonald as well from January 2010. Clayt Daley retired as CFO at the end of 2008 and was
replaced by Jon Moeller. Yet McDonald's reign was marked by a sharp decline in
performance as growth stalled and costs soared. With McDonald under increasing pressure
from investors, the board announced his resignation from July 2013, and the reinstatement of
the 66-year-old AG Lafley. Since Lafley is already past retirement age, one of his key tasks
has been to find a suitable successor to take over the baton.
The return of Lafley highlighted one of the other serious problems which emerged under
McDonald's command: the departure of several other potential leaders among P&G's top
ranks. McDonald's main rival for the top job, Susan Arnold, departed the group in 2009 as
soon as it became clear that she would not be named CEO. Following a further restructuring
in July 2011, Dimitri Panayotopoulos was appointed as group vice chairman, global business
units, with reporting responsibility for all the group's brand businesses, effectively introducing
a new layer between previous divisional bosses and the CEO role. That probably contributed
to the departure of several other managers. Ed Shirley, previously head of global beauty &
grooming, resigned to become CEO of Bacardi; "Chip" Bergh quit to become CEO of Levi
Strauss; Christopher de la Puente took the top job at LVMH's Sephora division.
In June 2013, Lafley announced a reshuffle of the group's global business units, in effect
elevating four executives to a position as potential candidates to succeed him as CEO. These
were Martin Riant (group president, global baby, feminine & family care), Deb Henretta
(group president, global beauty), David Taylor (group president, global health & grooming)
and Giovanni Ciserani (group president global fabric & home care). In Jan 2015, with beauty
still under-performing, Taylor was handed additional responsibility for beauty as well as
grooming & health, a move which appeared to put him in pole position to succeed Lafley.
Deb Henretta moved at the same time to a newly created position as group president,
ecommerce, before quietly leaving the group later the same year. Patrice Louvet moved up to
president, global beauty, reporting to Taylor. See P&G Beauty & Grooming and P&G
Household Care for other business unit heads. It was David Taylor who finally secured the
elevation to the top job. In July 2015 the group confirmed that he would become CEO of
Procter & Gamble from November 1st, with Lafley moving up to the position of executive

chairman. In July 2016, Taylor will become chairman as well, allowing to Lafley to retire for
the second time from P&G.
Werner Geissler retired as group vice chairman, and head of global operations at the end of
2014, along with several other executives, prompting multiple new appointments. As a result,
the current senior team includes Carolyn Tastad (president, North America selling & market
operations), Gary Coombe (president, Europe selling & market operations), Hatsunori
Kiriyama (president, Asia Pacific selling & market operations), Matthew Price (president,
Greater China selling & market operations), Mohamed Samir (president, India, Middle East &
Africa selling & market operations) and Tarek Farahat (president, Latin America selling &
market operations). Other senior central officers include Jeff Schomberger (global sales
officer), Julio Nemeth (president, global business services), Kathleen Fish (chief technology
officer) and Yannis Skoufalos (global product supply officer). Phil Duncan is VP & global
design officer, overseeing product design and packaging.
The marketing team was headed for several years by James Stengel until his retirement at the
end of October 2008. He was replaced by Marc Pritchard, now global brand building officer.
That change led to further changes in the company's marketing line-up. Other senior officers
in the marketing team now include Kristine Decker (brand director, North America operations
& marketing), Greg Ross (director of global media innovation), Lisa Hillenbrand (director of
global marketing), Stewart Atkinson (VP, global brand building purchases), Joan Lewis
(global consumer & market knowledge officer), Chris Hassall (global external relations
officer), Lyn Boles (VP, global advertising), Steven Squire (director of advertising
development), Ted McConnell (digital innovation director), Randy Peterson (digital
innovation manager), Alex Tosolini (VP, global e-commerce) and Ilonka Laviz (marketing
director, digital brand-building strategy & global strategy). Freddy Bharucha is chief
marketing officer for P&G in Asia. Doreen Bayliff, based in P&G Geneva, is VP, worldwide
brand operations. Gerry D'Angelo will join in early 2017 (from Mondelez) as global media
director.

P&G boss wants to improve the quality of its advertising

P&Gs CEO David Taylor says it is planning to further increase its media investment after
increasing it by $200m (163m) in 2015, as it looks to increase cut-through and make its
products more relevant in customers lives.
Speaking at Procter & Gambles annual shareholder meeting today (11 October), Taylor said
that even though organic sales are up 1%, the FMCG giant still has to do better.
He said P&G is looking to invest more heavily in marketing to increase the reach, consistency
and effectiveness of its campaigns.
In the fourth quarter of last year our media investment increased by $200m, and there are
plans to further increase this in 2017. We want to improve the quality of our advertising, and
make our brands more relevant to consumers, he said.

During the meeting he also shared two examples of marketing campaigns, including Pantenes
Strong Is Beautiful and Always Like A Girl campaign, that proved to be profitable while
promoting a social purpose. According to Taylor, the Like A Girl campaign has resulted in 1.5
billion global impressions so far.
The aforementioned campaigns are examples of our brands using their voice to make a
positive difference on relevant social topics, he commented.
Before the campaign, 19% of women viewed Like A Girl to be a positive expression, this
has now increased to 76%. It has also led to increased market share, more users, sales and
profit.
Taylor also mentioned the sale of some of its brands in a bid to cut costs. So far, it has
offloaded around 100 brands, including selling battery brand Duracell to Warren Buffets
Berkshire Hathaway and a huge chunk of its beauty brand business, including Max Factor,
Covergirl and Wella, to Coty as part of a $12.5bn (9.4bn) deal.
P&Gs business is now focused around 10 core categories, including family, fabric, skin and
personal, grooming and oral care.
READ MORE: One year on: Has P&G CEO David Taylor been a success?
The company is also hoping to make a further $10bn (8bn) in savings over the next five
years, which it will look to achieve through cutting its non-consumer marketing spend.
Taylor concluded: We want to make P&G a far simpler, faster growing and even more
profitable company. Since we began our portfolio overhaul, with the Coty deal now finished,
weve kept 86% of our sales and 94% of our profits. Hopefully this illustrates the opportunity
ahead for a new P&G to deliver stronger results.

Unilever and Tescos price row

A price row between Tesco and Unilever resulted in online panic this week, as thousands took
to social media to express their dismay at the lack of Marmite on their supermarket shelves.
The vote to leave the European Union is what created the unexpected impact on supplies of
brand favourites such as Marmite, PG Tips and Hellmans, with Unilever blaming Brexit and
the falling value of the pound for a need to increase the price it charges retailers by 10%.
Speaking on an investor call on Thursday (13 October), Unilevers CFO Graeme Pitkethly
said: Its important to point out that we dont set prices for consumers at the end of the day.
We are in a devaluation-led cycle. We care deeply about customer affordability of our brands.
As a consequence, price increases have landed with most of our customers. So much of the
press covered it this morning, but were confident it will be resolved pretty quickly.
Read more: Do Marmite customers love or hate Brexit?

However, the argument between Tesco was resolved in less than 24 hours. Today (14
October), a Unilever statement read: We have been working closely together to reach this
resolution and ensure our much-loved brands are once again fully available. For all those that
missed us, thanks for all the love.
Not bad publicity for a 24 hour spat, eh?

Brexit set to be a rollercoaster for marketing budgets and jobs

On the surface it looked like good news for marketers with ad budgets hitting their highest
level for more than two years in the third quarter.
More than a quarter (26.2%) of senior marketers increased their ad spend during the third
quarter, compared to 12.9% who registered a fall, according to the IPAs quarterly Bellwether
Report. This means the balance of marketers saying they would increase their spend stands at
+13.4%, a rise of nearly three percentage points compared to the second quarter the highest
level since Q2 2014.
However, the figures, which were released earlier this week, could be deceiving. Theresa
Mays pledge to evoke Article 50 by March 2017 has not exactly instilled enthusiasm among
the business community, while the pound has also hit a 31-year-low.
Paul Troy, CMO of Confused.com, is particularly concerned. He summarised: You will get a
true sense of what is happening in March next year. I reckon the first quarter will be positive
but come the second quarter marketing budgets will drop drastically and it will be very much
a year of two halves.
Nobody will want to throw millions at TV in the second quarter or maybe even the third, as
they will be hesitant when planning as thats when we will know if Britain will retain access
to things such as the single market.
https://www.marketingweek.com/2016/10/14/marmite-oxo-and-pg-five-thingsthat-mattered-this-week/